McCORMICK & COMPANY 2008 ANNUAL REPORT

McCORMICK & COMPANY
2008 ANNUAL REPORT

program. The segment breakdown of the total charges is expected to be approximately 65% related to the consumer segment and 35% related to the industrial segment. Of these charges, we expect approximately $100 million will consist of severance and other personnel costs and approximately $50 million for other exit costs. Asset write-offs are expected to be approximately $10 million, exclusive of the $34 million pre-tax gain on the redemption of our Signature Brands, L.L.C. joint venture (Signature) recorded in 2006. We expect the cash related portion of the charges will be approximately $105 million. As of November 30, 2008 the majority of our restructuring program had been completed, although certain parts are still underway and will be completed in 2009.
The following is a summary of restructuring activities:

      From inception of the project in November 2005, we have incurred $112.5 million of restructuring charges, including gains on the disposals of our manufacturing facility in 2007 and 2008, the $33.7 million gain recorded on the redemption of our Signature investment in 2006 and other gains from joint ventures in 2006 and 2007. The actions being taken pursuant to the restructuring plan are expected to eliminate 1,325 positions by the conclusion of the plan. Of the expected global workforce reduction, 1,270 positions have been eliminated as of November 30, 2008.
      Joint Venture Transactions – Previously, we participated in two separate joint ventures with the same joint venture partner, Hero A.G. We owned 50% of Signature and 51% of Dessert Products International, S.A.S. (DPI). Signature is a cake decorating business in the U.S. and DPI markets the Vahiné brand of dessert aids in France and other European countries.
      In 2006, we received the remaining 49% share of DPI in redemption of our 50% ownership investment in Signature.
In addition, we received $9.2 million in cash with this transaction.
      In recording this transaction, we valued both
the investment received and the investment given at
their fair value.

On the disposition of our Signature investment, the fair value of our investment was $56.0 million as compared to our book value of this unconsolidated subsidiary of $21.7 million. After consideration of transaction costs of $0.6 million and taxes of $7.2 million, we recorded a net after-tax gain of $26.5 million which is shown on the line entitled “(Loss) gain on sale of unconsolidated operations” in our income statement. On the acquisition of the 49% minority interest of DPI, the fair value of these shares was assessed at $46.9 million. Since this business was consolidated, the book value of this 49% share was shown as $29.9 million of minority interest on our balance sheet. After consideration of transaction costs of $0.7 million, we allocated $17.7 million to goodwill. The impact of increasing our share in DPI and disposing of Signature on future net income is not material.
      In 2006, in connection with exiting an unconsolidated joint venture in Japan, we recorded a net gain of $0.3 million, after-tax. Finalization of these unconsolidated joint venture transactions resulted in a loss of $0.8 million, after-tax, in 2007.
      These actions are part of our plan to simplify our joint venture structure under the restructuring program and focus on those areas we believe have strong growth potential.
      Other Restructuring Costs – In 2008, we recorded $13.0 million of severance costs, primarily associated with the reduction of administrative personnel in Europe, the U.S. and Canada. In addition, we recorded $9.1 million of other exit costs related to the consolidation of production facilities in Europe and the reorganization of distribution networks in the U.S and U.K. These restructuring charges were offset by a $5.5 million credit related to the disposal of assets. This credit was primarily the result of a gain on the disposal of our Salinas manufacturing facility, which was consolidated with other manufacturing facilities in 2007.
      In 2007, we recorded $14.9 million of severance costs, primarily associated with the reduction of administrative personnel in the U.S. and Europe. In addition, we recorded $16.7 million of other exit costs resulting from the closure of manufacturing facilities in Salinas, California and Hunt Valley, Maryland and the consolidation of production facilities in Europe. The remaining $2.4 million of asset writedowns is comprised of inventory write-offs as a result of the closure of the manufacturing facilities in Salinas, California and Hunt Valley, Maryland and accelerated